COMMISSIONER OF INCOME TAX Vs. ASLOT H R

JUDGEMENT

(1.) At the instance of the Revenue, the following question has been referred to this Court under S. 66 (1) of the Indian IT Act, 1922 :

(2.) The assessee, H.R. Aslot, was a partner in a partnership firm known as Automobile and Agricultural Industries Corporation which was constituted under the partnership deed, dt. 31st Jan., 1953. Apart from the assessee there were 7 other partners out of whom N.K. Naik was one. One of the terms of the partnership deed was that if any dispute arose between the partners or their representatives, whether during or after the termination of the partnership and whether in relation to the interpretation of the partnership deed or to any act or omission of any party to the dispute or to any act which ought to be done by the parties in dispute or any of them or in relation to any other matters whatsoever touching the partnership affairs, that dispute shall be referred to arbitration in accordance with the provisions of the Indian Arbitration Act. Each partner was to appoint an arbitrator for the arbitration. There was some dispute among the partners in the year 1959 and the disputes were referred to the arbitration of one Mr. Manilal P. Kapadia, a solicitor. The terms of reference of arbitration to Mr. Kapadia included all matters relating to the dissolution of the partnership and the winding up of the affairs of the firm and the accounts of the division and distribution of the assets of the partnership and moneys amongst the partners in accordance with their respective shares either in specie or in such other manner as the arbitrator may determine. The arbitrator was also empowered to determine the date from which the partnership was to be treated as dissolved. The assessee, Mr. Aslot had 5 annas share in the partnership firm and the other partner, Mr. N.K. Naik, had one anna share. The arbitrator made his award on 13th Feb., 1960. In substance, the effect of the award was that the assessee, Aslot, and N.K. Naik were to stand retired from the firm from 1st Jan., 1960, and as from that date the business was to be carried on in the original firm name or in any other name by the remaining partners. The continuing partners were to pay to the retiring partners a sum of Rs.5,60,000.00 in satisfaction of their respective shares and interest in their partnership and the capital effects and goodwill thereof. The retiring partners were to have for themselves the office premises of the partnership firm situated at Mody Chambers, French Bridge, Bombay. There was a distribution of a part of the business, and the business of supply of goods mentioned in Schedule A to the award was to belong to the retiring partners and the continuing partners were not to carry it on for a period of four years. Since some argument has turned on the actual wording of the award, it is necessary to reproduce some relevant parts thereof. Clauses 2 and 3 of the award which are the material parts read as follows :

(3.) In pursuance of the award the assessee, Aslot, had received an amount of Rs.4,67,529..00 The amount standing to the credit of the assessee in the books of the firm on 31st Oct., 1959, was determined at Rs.2,33,535..00 The difference between the amount received by Ashlot and the amount standing the credit in the partnership account amounting to Rs.2,33,994.00 was treated as income of the assessee by the ITO in the asst. year 1960 61, the corresponding previous year being the calendar year 1959.